Earlier this week I had the pleasure, together with Dr Fabian Sting of RSM Erasmus University, to present the Netherlands Industrial Excellence Award 2015 to Philips Drachten.

When I was a student in the 1980s in Eindhoven, the city was still buzzing with Philips research, development, and manufacturing. By now, only research is remaining at a large scale, with much of the development and most of the manufacturing gone. Due to a cost imperative and insufficient attention on the strength and requirements for manufacturing in the Netherlands, Philips’ presence in the Netherlands has been reduced drastically.

In the Northern Netherlands (what we refer to as “Friesland”) , in the town of Drachten, however, the local management have taken their destiny into their own hands. Only recently this factory had been reduced to merely producing the shaver heads, which were considered a proprietary technology and too risky to move offshore. Management, product engineers, and process engineers have collaboratively developed a remarkable business case to re-shore an increasing amount of volume from China back to the Netherlands. This flagship re-shoring has drawn lots of attention in media worldwide, although unfortunately just the changing cost differential dominates that media attention.

Based on our assessment, Dr Sting and I are convinced the key value proposition of the Philips Drachten plant within the global Philips manufacturing base is not just in the cost differential, but in the continuous drive to improve and innovate, in both process and in products.

This is exemplified by three key characteristics of the Drachten plant:

1. Reaping the benefits of co-Location.

Product and Process development are located in one site and literally “sit in one room”. Intense collaboration has led to tremendous cost reductions (via better design-for-manufacturing and more efficient product ramp-ups) but also to product innovation driven by process innovations (via enhanced design freedom through better manufacturing processes).

2. A culture of continuous improvement that is shared down to the factory floor.

Via an effective Hoshin process strategy execution is followed through to the factory floor, with line managers fully aware of strategic priorities. Further, an amazing 90% of shop floor workers have participated in Kaizen process improvements to enhance safety, environmental, and productivity performance.

3. The factory as a network player.

Philips Drachten collaborates very intensely with its suppliers, particularly in steel, to develop new materials and processes. This in turn allows for designing better products. Philips invests heavily in these long-term supplier relations with mutual visits of not only the process engineers, but also of shop floor workers. Additionally, Philips as a major employer in the Friesland region takes responsibility for the local capability development, with heavy involvement in increasing enrolment and commitment with the regional vocational school and regional SME to enlarge the overall employment base.

Their strategy has enabled Philips Drachten to reshore production from China: Mid- and high-end production have been brought back from China, benefiting from co-location efficiencies as well as from higher degrees of automation and helped by increasing Chinese wages. This also enables more responsive production in the fashion driven shaver business.

In conclusion, it is not just the plant, but the entire Philips Drachten operation as a central part of its surrounding ecosystem that has convinced us to declare them the winner of the Netherlands’ Industrial Excellence Award 2015.

Are you interested in competing for next year’s award? Apply here

This blog was also published on 30 September 2015 on my LinkedIn page